Why Can’t 3.4 Million in Sales Be Profitable for a Game?

Gamnesia: "I've been waiting days to cover this story because I wanted to better frame my approach. See, 3.4 million copies sold of a game are some pretty lofty numbers. Sure, maybe that's a poor number for say, a console Zelda release, but it's still a profitable number. Tomb Raider's original popularity may never be matched, but since the 90's the franchise has been pretty pathetic in sales numbers, failing to even top 1 million.

In comes a highly touted and well reviewed reboot of the whole franchise. It moved 3.4 million physical copies across all platforms, the most the series has moved since the 90's. In addition, if you add digital sales, you're likely looking at a number north of 4 million total sales. That ranks it as the 3rd best selling game in the series and probably when it's all said and done, potentially the 2nd best. That, to me, seems like a very successful reboot. The fans are raving, the critics are raving, people bought the product, and things seem fine.

This game with 3.4 million sold (not counting digital sales) is most likely very profitable. Tomb Raider will probably sell 5+ million in it's lifetime.... i can't believe a game with these sales is not profitable, unless someone is stealing.

Square wanted more sales, because they probably wanted to cover the expenses on other well over-budget games they have in the making for sooooo loooong, like Final Fantasy 13 Versus and Final Fantasy 14 online.

5 million sales is only enough if stores, publisher, platform holder and developers collectively paid less than $300,000,000 for this game.

That sounds like an awful lot, but you have to split it four ways (not evenly) and then look at individual costs to figure out how profitable it's been.

First, knock off probably almost a third of that for stores. Cleaning, staff, transportation (including petrol and petrol, extra if transport is handled by external company), storage, security, advertising materials, bonus DLC. In the end, the game store probably makes a profit, but of that $100 mil, they've spent an awful lot before they even see penny one. Factor in interest as well.

I don't know what licencing fees are for platform holders, so I'm not going to include that here. I once heard it was as high as $13 a game sold, but can't source. I've also seen it been called as low as $30,000. I guess it depends, but either way, this is something that needs to come out of the overall cost.

So that leaves $200,000,000 to split between the publisher and the developer. The developer doesn't get a huge amount of that, enough to cover their costs and make a small profit, I imagine. Let's call it an optimistic quarter. A cool $50 mil. The game was in development for several years, including a few failed starts, so you're probably looking at 6 years wages for, what, 30 people? 30*$40,000*6. That's just shy of 7,500,000 - more than 10% of their profit - and that's before we talk licencing engines and tech.

Then you've got everything from petty cash to the end of development party to pay for. They probably pay for QA themselves, and patches (and work on patches).

So Square are handling $150,000,000, except they're not. A lot of that is paying off what they've already put into the game - hiring the dev team, BUYING the franchise, marketing it, paying wages, PR in each country - and then they have to pay interest on the loans they took out to pay for the game in the first place. They have to pay internet connections, trips around the world for games conventions.

In short, of the $300,000,000, Square Enix probably haven't seen much that wasn't already spent. And these figures are presuming that it hits 5 million sales at $60 (which we know isn't true).

If you want to know why everyone is pushing DLC so much, just check out the figures. Games just are stupidly difficult to make a profit from.

People just don't get it. Companies are not just interested in breaking even. They are interested in profits, and increasing company value for shareholders. Don't forget that the vast majority of Western companies will always put profits ahead of everything else. It will completely dump a franchise that is profitable but is not making ENOUGH profit (see: what EA does with Dead Space after less than 5 million sales of DS3).

Plus, developers all want to get paid. Once all devs have been paid, on top of that it's profit.

Publishers don't have to pay the stores to stock games. Stores buy the games from the publishers and then sell them at a profit. A store must buy so many units that it think it can sell. Once stock is empty then it reorders. This is why you often see "Total games shipped" figures, as the publisher makes money on everything it ships to retail. Whether the game sells after that is the retail outlet's problem.

Platform holders are paid either a lump sum or a per unit profit, depending on the contract each platform holder sets up.

Therefore, profits for publishers are dependent mostly on development costs, and the publisher's ability to effectively market the game. This is why publishers are so adamant that deadlines are met, because extra time in development means costs go up, and that potentially eats into profits. If companies cared whether a game was good or not, there would be no deadline, it would be "ship the game when it's ready" attitude that is usually given to much more lenient and respectable developers like the Bioshock team. The publisher understands that a game MUST have the quality there to sell games, and uphold their reputation for great games.

In the case of other publishers, developers are pushed to meet deadlines no matter what, particularly to meet the Christmas rush since that tends to be a very important sales period for a lot of publishers. Whether you agree with one strategy or another isn't the point.

Well...if the game did have a $50 million dollar marketing budget(not sure if that's accurate), then with 3.4 million sold, and assuming the publisher recouped $15 per unit sold(general average I've seen reported per copy sold of most games), then they only brought in $51 million dollars in revenue to the company itself.

All these numbers don't take into account future sales(over the next few months or lifetime), or digital sales, but even so it's easy to see how the marketing budget could have made what could have been a profitable game into an unprofitable game. On top of that even that $15 brought in doesn't all go into the coffers to recoup investment...some has to be paid out to investors or the developers themselves.

That was the point the article was making. When determining an investment(particular in marketing) a company should be responsible with how much actual return they will get for that investment. Realistically we can assume this game costs $30 million to develop, and if the $50 million marketing is true then target sales would have to be 5.3 million to recoup initial investment before seeing a profit(excluding costs that need to be paid out after the fact). In this case it was irresponsible if they hoped to sell that many in this short a time based on the history of the series.

Lifetime will probably make this game profitable, but not the success financially that SE was hoping for. Shame because it's a fantastic game.

Your numbers are way the fuck off. First of all, one of the most expensive games ever made ran around $100 million in total expenses (GTA4). Really, you don't see games even cross the $50 million mark often in expenses.

Gamestop/Best Buy/Target, etc., get $12 per disc sold. Sony/MS get $12 as well (part of the reason PC games are cheaper as far as disc sales). From there, that leaves $36 per disc for the publisher (who, in this case, owns the developer).

Tomb Raider did not take 6 years to make. CD had released TR:Underworld only a few years ago. They developed their own engine in-house, so no licensing fees for tech. And a good-sized studio like CD has roughly 100 people making about $100k each (less so for artists, more so for dev leads, directors, etc.).

Really, even with a much more massive marketing campaign, this game shouldn't have cost more than $30-40 million to make.

If you are going to dive into all their expenses, you need to dive into all their revenue too. With the game comes licensing, websites paying for exclusives, co-advertising with Game stores, etc.... You see a Tomb Raider shirt? Well either they are selling that 2 dollar shirt at 25 dollars on their own, or another company paid for licensing rights to do it. I saw shirts, posters, statues, and action figures for the game. They could also license out to DC or Marvel and create comic books. It isn't just a game making them money, its a product.

The publisher or game developers don't get the full $60 or so has a few dollars has to go to the store that distributes it or else the retailer won't make money. I'm not sure exactly how much retailers get from the full price but the projected sales of 3.4 million was probably as estimate to how much sales they needed in order for a proper sequel or to have enough for development of the next game.

Most breakdowns I've seen of how much the publisher gets per unit sold is around the $12-15 mark. It can vary throughout the games lifetime, as when it goes on sale a month or two later the publisher may get less. Most sales are actually because the publisher offers it to the retailer, with the retailer sometimes taking in less profit per unit sold in order to move stock.

SE; useless online and weak story, now improve the single player story and make it 15-20hrs and get rid of online. TR is a 8-10hrs game and to a lot of people that's not worth the full price

tomb raider is good but there is huge room for improvement, it reminds me of how the 1st uncharted game was and how much the 2nd improved

for a reboot and selling quick 3.4 million at full price not including the digital sales at EA Origins,PSN and XBlive is pretty good. SE must have expected it to do 10 million plus but you look at last 6-7 years of past gen how many games got to over 10 million?

I don't think this game cost SE 100million and not even 7080 million, i believe the development cost of this was aright around 40-60 million the average for most AAA games unless its a open world game like GTA

200 employees equals to 20 million a year times 2 and that's 40 million, but that's considering if full 200 people were on one project for whole 2 years, most of the times teams move on to other projects within the company

tomb raider 2 won't even do 10 million, this is a series that has to settle somewhere between 5-8 million and 8 being the maximum.

one of the biggest things the sequel needs to improve is the story, because it was the weakest part of the reboot, also get rid of MP and focus on single player and making that last 15-20 hours

Tomb Raider has been dead for years. This is a knowingly ignored franchise by gamers and Crystal Dynamics had to completely reinvent this franchise. What they have done is great one of the best games this gen. Easily in my top ten.

Those sales are fine, Square constantly seems to miss it's sales targets even when games move millions of units. I don't know if they expect these games to sell Call of Duty numbers but all these games from Edios are moving millions of units and Square keeps saying they're missing their target. Seem like Square is still living in an other world where good money isn't good enough, even when Edios keep handing them gems.

@Swiftfox, they did indeed sell 3.4m units approximately. Financial Year 2013 ends in 2 days as of right now. This number is the actual sales to date plus 5 days out forecast as of the time of the graph being put out. You're misunderstanding the word 'expected' in this context. These are as close to actual figures you're going to get before before year end. That's what the original neogaf graphs from SE were showing us. They weren't the expected shipped numbers, they were the numbers they were expecting to have and DO have in their forecast and reports, and even at the bottom it said something about "These numbers are expected to be the same when the actual reports shift out in April." or something in that context. So yes, it really did ship 3.4m units and SE is saying that missed it's mark but they didn't disclose by how much.

just saying how much profit do they get per game sold = the true profit, they get plenty of money but not to cover for their bad investments such as FF13/FF13-2/Lightning Returns, but they have nobody else to blame

And the article pointed out that companies should be smarter with their marketing budgets. For instance, you can spend less on marketing, sell less units, but still turn a profit.

Primetime is great for getting the word out, but I believe for games it doesn't really translate to copies sold in a meaningful enough number to make the cost worth it.

In store marketing(retail displays), strong viral marketing tactics, and print advertising a much cheaper, and tend to return more on investment any day over primetime TV. Particularly for a product that isn't something that everyone uses, or feels they might need.

More like gamers should expand their horizon and try different types of games instead of just shooters. Let's say there are 200 million gamers in total across all platforms, then 3.4 million copies is just a fraction of the total user base.

Without our support there won't be any new/innovative games as developers will fear to take risks.

I blame a tightly-congested market. I would've bought it but I'm saving up for The Last Of Us, BIOSHOCK INFINITE, Killzone Mercenary, J&D:HD Vita, Beyond: Two Souls, GRAND THEFT AUTO V, Sniper Elite V2 GOTY and more indie titles for my Vita. To say that I'm overwhelmed by games would be an understatement. My backlog is also phenomenal.

I would say it's more like 100-150 million users when you account for multiple-platform gamers, people who have had to buy new systems to replace faulty ones, etc.

Still 3-4 sales for every 100 or so gamers is pathetic. I wonder if this is the result of gamer fatigue? I know plenty of people who are sick of being nickel and dimed by DLC, microtransactions, and will usually avoid paying for a game since they're completionists and simply don't want to spend $90+ for the entire experience.

We have to assume it simply did not cover the costs. 3.4 million units sold would go to about $204,000,000 earned from sales and Square simply spent more than that to have the game made, shipped and marketed.

Shame too. I've been itching to try this game out since a lot of my friends really liked it. I'll still play it, don't get me wrong, but it seems like it's one of those games that should have been more successful.

I honestly don't believe they spent anything close to that for development and marketing. Square was simply hoping for astonishing, not just strong, sales for the game. Considering the lack of interest for the series through the years, hitting three and a half (so far) million in sales is not a bad thing at all.

Yeah, they didn't make this game to just "break even", and they usually don't predict sales based on how much they need to break even. I'm pretty sure this game made money, just not as much as they hoped it would.

When you pass an exam with a lower grade than what you expected, you still pass, but do you call it a success ? ;)

As others said, the game itself likely brought a tidy profit and was a success in its own right. The publisher though was expecting more (which is nuts) and likely was wanting more sales simply to offset losses and expenses elsewhere.

i really liked the game. Was a day one purchase for me and I never regretted it. The problem I see is the price. I am not a poor by any means so its easier for me to buy anything I want but I do have ALOT of friends that dont have the best jobs or I hear alot of people go "65.00 for a game is nuts" then they never buy it.

I'd also like to point out how different the new TR is from the old ones.

Now I love the new one, but it took many recommendations from people whose tastes I agree with to make me put down $60 for it, since I'd never liked the other TR games, and needed to be convinced this one was different.

Now for a person who liked the old tomb raider games, everyone has been saying how different the game is from previous iterations so they need to decide whether or not $60 dollars is worth it for a game that apparently strays from the 'core' series they enjoyed.

You do know the entire 60 is not paid directly to the developers? I read in an article awhile ago that about 20 bucks goes back to them. Retailers and publishers take a heft cut plus Sony ms and Nintendo charge license fees for games to be played on their systems. Also, this figure was what they wanted to sell it is not what they have sold.

New games sales actually only net about a 15-25% markup for retailers. Hardly a big chunk. In fact it's one of the lowest markups in any retail environment. The typical markup of most consumer products is between 75-200%.

There are many easy to find cost breakdowns on the net if you care to actually research. Most of them are pretty consistent, and I've been told personally that GameStop makes at most $15 on a new game sold. Not very high when you consider how much it actually costs to run a retail store such as that.

It depends on production values, man hours and the size of the team necessary to bring it to multiple consoles. If it represented the sales of JUST the 360 or the PS3 then they would be considered pretty good numbers. Having said that, I think that SE had unreal expectations anyway.

These console mfg must change there ways or go bankrupt. Sony is in the most trouble but are shedding studios and looking into the indie scene to help compensate. Ms is also finding other ways to stay fresh and keep alive which many call them as going casual when its really abiut a mix to keep things alive and profitable. The more these machines can do will cost the devs more to show it so there has to be a backstream of money comi g in from either as ms tried last gen with the indie channel and kinect. Hopefuy sony can do more with lifting restrictions and keep some of the budgets down or theh will go broke.

Bandit all around. These publisher would milk us dry if they could p. Most games that sell over a million are profitable, I'm sure over two million this became profitable for them, These greedy %ucks just always cry and want more money. The sales aren't even ended for this game it will easily hit 5 mil when its all said and done,

I fear for the future of gaming. It used to be great to move a million units. Now apparently selling 3 million + is bad. Even if TR made money SquareEnix they still posted billions in loses. If they keep it up they may end up like THQ in a few years. I never thought I'd see the day but the company hasn't been a powerhouse since its snes, PS1/2 days.

So basically you guys are telling the people who made the game and spent money on it that 3.4 million across three systems is enough? What are you their accountants or something.How do you know it is enough? Was it your money they spent?

Because the devs dont see a lot of that money...its goes to the PUBLISHER, just for starters. Production values are going through the roof to bring these endless whiners a prettier game every year and yet in gamers ignorance they still bitch about the possibility of game prices going up when they have no clue what running a game company entails. I am surpised prices havent gone up already. These devs arent working with an atari 2600 where a game can be made for a few thousand bucks in a few weeks. Its as though these kids think running a game company is a "license to print money". Put down your pudding cup and research a real world game dev business scenario. Here's a loose one and perhaps not entirely accurate but you get the basic idea: Mommy and Daddy want you-(dev) to cut the lawn and will pay you 5.00. You have to pay for the gas-(publisher) 3.50 to run the mower. That leaves you 1.50 to pay back your friend-(employees) for the lollypops and gumballs he gave you. Whats left over for you? Not much. Not to mention licensing fees to Sony and MS etc for putting the game on their system. And this is just the tip of the iceberg for expenses.

The problem is not that Tomb Raider or Hitman weren't successful games. The problem is Square had put high hopes on their sales to make up for deficiencies in the companies other products. Final Fantasy 14, Versus 13.. both are basically money pits in that company. They have sunk tons of dollars into them and were expecting other games sales to help off set the losses they have taken from those games and their development. Their expectations were way to high and they refuse to look at the real issue which is their Japanese team.

Why do you do that? You know that doesn't help this situation at all right? The used numbers aren't even nominally different from the new numbers when you talk about costs. Plus how much you spent in gas to get to the place in the first place you end up spending just about the same or more and you could just order it brand new from Amazon for $42.

Games made in a board room dont make profit easily. Game made by by devs make tons of money, look at the witcher 2, it probably has only sold 2 million by now, made enough profit to make an open world witcher 3 and another game.

i believe it is because how much bigger the used game market has become then ever before and because of this growth company's dont have the ability to count on second hand new game sells and only of the first round sells. so think of it as this your company makes other games that might put you in the red b/c their not all selling as good a 3 million copies and and the little sells thoes games do make is great for the time but it wont last and your really able to count on only first hand new sells never second hand new sells. b/c older games sell like hot cakes for a used game market that give the company and the developers new money for it game their but putting them in the red so when big games do come they might give them 3.5 million copies but their company is in a bigger red hoe then of lets say 7.6 million so then a very well selling game has to do call of duty numbers inorder to make your company money then even with the big games you cant count on second hand new sells b/c again lots of ppl well buy a used copie of a hot going game and guess what you cant pay the bills with nothing.

No. They didn't disclose the target. That is how much it actually made. You are missing some writing from that picture. "doesn't include digital. this is expected shipments because formal report comes in early May. but will be same as these. this slide suggest all three didn't meet targets and price protection needed to move units."

It also said that. These numbers will be final on the REAL reports, so why would they say that if this isn't what it sold so far before the fiscal year was over?

A lot probably has to go to investors and paying back possible loans and whatnot. Also employee's salaries. Also distribution. Also advertisement. Also paying Sony and Microsoft etc. In fact there's probably much more payments involved than I or anyone realises. (except mattgrowcott above)

The profit is what's left, so clearly all of the above stuff and more is costing them a lot.

This article is taking one line from a small report that Tomb raider didn't sell as much as they wanted it to and making sound like they didn't make money from it. They expected a certain number of sales and it didn't reach those no where did it say that it was not profitable. Yeah this is "game journalism"